Credit rationing during credit supply shock: Insights from loan level data

Noam Michelson

International Review of Economics & Finance, 2025, vol. 103, issue C

Abstract: This paper examines bank credit allocation under an exogenous shock to credit supply within a stable financial system. The paper utilizes proprietary loan-level data collected from all Israeli commercial banks to examine how massive drawdowns on committed credit following the COVID-19 outbreak impacted credit supply, to firms without committed credit. Using the variation in drawdowns on committed credit across banks and data on firms borrowing from multiple banks, the study demonstrates that credit supply contracted more in banks that experienced larger drawdowns, resulting in a negative impact on the amount of credit granted to borrowers without committed credit. During this credit supply shortage, borrowers with longer relationships with their lending bank and alternative funding sources experienced more severe credit rationing.

Keywords: Committed credit; Financial distress; Credit supply; COVID-19; Loan-level data (search for similar items in EconPapers)
JEL-codes: G01 G21 G32 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056025006616
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:103:y:2025:i:c:s1059056025006616

DOI: 10.1016/j.iref.2025.104498

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().